The Greek Tragedy Re-Accelerates with More Silent Bank Runs

by John Galt
June 10, 2012 20:55 ET

Just as the Spantarp seems to has pacified the equity traders for twenty-four hours, the news heading into the Greek elections indicates further issues that the mainstream bubblemedia and the European Union wishes not to discuss. From the Greek newspaper Ekathimerini:

The political polarization and uncertainty regarding Greece’s position in the eurozone generated a fresh spike in bank withdrawals last week.

In the last few days, withdrawals have increased again as bank clients convert their money into foreign bonds (mostly German) or opt for various alternative investments based on the US dollar in mutual funds.

In May, deposit withdrawals were estimated to have amounted to 5 or 6 billion euros. Bank officials say the situation remains under control, pointing at the completion of the first phase of the recapitalization plan with the disbursement of 18 billion euros to the country’s four main commercial banks that has strengthened them considerably.

However, bad loans are piling on the pressure as the number of loans whose repayment is delayed by more than 90 days is continuing to rise after amounting to 18 percent of all loans at the end of March.

Oops. I hope the wise Spanish depositors realize the fallacy of keeping their funds inside their failing and flailing institutions as Greece is the model, unfortunately not the solution. To get some idea of the volume of withdrawals, I present this excerpt from another Greek newspaper, Protothema:

These outflows are primarily through cash withdrawal for fear the country out of the euro and because most believe it will be safer if they have euro notes and one for cash withdrawal because it leaves “traces” as in the case of interbank transactions.

It is significant that the last time “goes hand” even corporate accounts are removed from the relatively large amounts, while the last week again observed phenomenon, depositors request cash sums of several thousand that can be overcome and the 80.000 – 100,000 euros . In such cases, banks ask their clients for a few days notice, to make the transaction, while smaller amounts to 30,000 or 40,000 euros serving them the same day.

According to rough estimates in the last fortnight is likely to be withdrawn from the banking system even 6-7 billion, bringing the total output to 80 billion over the last two years.

This reduction is dramatic evolution of deposits in the banking system, despite the advance of 18 billion received by the four major banks by the Financial Stability Fund, sharply reducing the system’s capabilities to support liquidity in the real economy, as a part the aid is used to cover the loss of deposits.

The great uncertainty and challenge prevailing abroad in Greece, adds degrees of difficulty in the banks, which reportedly face “onerous” terms in their attempt to close swap agreements with foreign banks using bonds as part of EFSF the recent strengthening them. The same information indicates that the environment is extremely negative as is indicated by the fact that foreign banks to close contracts, accept absolutely safe bonds EFSF if not 100 or even up to 90 but 50 or 60, further restricting liquidity that can be drawn.

At the same time, it is equally dramatic developments in the loans, with bad debts continue to rise forcing banks to increase provisions and committing funds. “There’s no business today, even if not facing liquidity problems, which repays regularly and consistently debt obligations,” says banker with long experience in business lending. “After the elections and see” is the usual response, adds the same strain, while explaining that the only issue where customer interest remains undiminished is the question “what do my money?”

(translated with Google translate)

Holy smokes! In other words as more money is pouring in from the ECB and EU, more Greek citizens with half a brain are conducting a bank run. Too bad the MSM and Bubblemedia refuses to cover this story as it would help the intelligent investor or citizen realize that the Euro is doomed in its current form as “print and pray” is no strategy for economic recovery.

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